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INCOME TAXES | 12 Months Ended
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Dec. 31, 2018
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES Income (loss) before income taxes and the related tax expense is as follows (in thousands):
| Year Ended December 31,
| 2018 |  | 2017 |  | 2016
Income (loss) before income taxes: |  |  |  |  |
Domestic | $ | 5,169 |  |  | $ | (39,898 | ) |  | $ | (36,339 | )
Foreign | (5,594 | ) |  | (2,573 | ) |  | (1,505 | )
Total loss before income taxes | $ | (425 | ) |  | $ | (42,471 | ) |  | $ | (37,844 | )
Current taxes: |  |  |  |  |
Federal | $ | (96 | ) |  | $ | — |  |  | $ | 11 |
State | 142 |  |  | 140 |  |  | 94 |
Total income tax expense | $ | 46 |  |  | $ | 140 |  |  | $ | 105 |
The tax provisions for each of the years ended December 31, 2018, 2017 and 2016 are principally the result of minimum state taxes. A reconciliation of income taxes at the U.S. federal statutory rate to the provision for income taxes is as follows:
| Year Ended December 31,
| 2018 |  | 2017 |  | 2016
U.S. federal statutory rate | 21.00 | % |  | 35.00 | % |  | 35.00 | %
State taxes | (24.84 | )% |  | 2.26 | % |  | 2.20 | %
Foreign taxes | (92.04 | )% |  | (1.28 | )% |  | (0.81 | )%
Change in valuation allowance | 369.27 | % |  | 4.58 | % |  | (43.96 | )%
Stock-based compensation | (874.29 | )% |  | (1.21 | )% |  | (0.54 | )%
Tax credits | 700.35 | % |  | 4.96 | % |  | 8.77 | %
Interest expense | 218.47 | % |  | 2.90 | % |  | 5.75 | %
Effect of rate changes | 13.44 | % |  | (130.88 | )% |  | (4.65 | )%
Convertible senior notes refinancing | — | % |  | 6.55 | % |  | — | %
Effect of the adoption of ASU 2016-09 | — | % |  | 68.89 | % |  | — | %
Nondeductible expenses | (132.96 | )% |  | — | % |  | — | %
Reserves | (202.98 | )% |  | — | % |  | — | %
Other | (6.15 | )% |  | 7.90 | % |  | (2.04 | )%
Effective tax rate | (10.73 | )% |  | (0.33 | )% |  | (0.28 | )%
The Company’s effective tax rates of (10.73)%, (0.33)% and (0.28)% for the years ended December 31, 2018, 2017 and 2016, respectively, differed from the expected U.S. statutory tax rate of 21.0% (previously 35.0%). This difference was primarily driven by pretax losses for which the Company concluded that a majority of its tax benefits are not more-likely-than-not to be realized, resulting in the recording of a full valuation allowance. Deferred taxes reflect the tax effects of the differences between the amounts recorded as assets and liabilities for financial reporting purposes and the comparable amounts recorded for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities at December 31, 2018 and 2017 are as follows (in thousands):
| December 31,
| 2018 |  | 2017
Deferred tax assets: |  |  |
Net operating loss carry-forwards | $ | 79,446 |  |  | $ | 95,067 |
Federal and state credits | 17,730 |  |  | 15,048 |
Depreciation and amortization | 2,851 |  |  | 2,593 |
Accruals and reserves | 11,009 |  |  | 2,743 |
Deferred revenue | — |  |  | 1,841 |
Stock based compensation | 18,302 |  |  | 16,925 |
Inventory | 848 |  |  | 552 |
Other | 127 |  |  | 139 |
Total deferred tax assets | 130,313 |  |  | 134,908 |
Deferred tax liabilities: |  |  |
Discount on convertible senior notes | (11,655 | ) |  | (14,678 | )
Deferred tax assets, net of deferred tax liabilities | 118,658 |  |  | 120,230 |
Less: valuation allowance | (118,658 | ) |  | (120,230 | )
Net deferred tax assets | $ | — |  |  | $ | — |
As of December 31, 2018, the Company’s federal net operating losses, or NOLs, and federal tax credit carryforwards totaled $346.2 million and $12.7 million, respectively. The Company also had state NOLs and state tax credit carryforwards of $159.2 million and $6.3 million, respectively, which are subject to change on an annual basis due to variations in the Company’s annual state apportionment factors. The Company had non-U.S. tax NOLs of $11.4 million at December 31, 2018. The existing federal NOLs will begin expiring in 2027 while the existing state NOLs begin expiring in 2024, if the Company has not used them prior to that time. The non-U.S. NOLs do not expire. Since the Company had cumulative changes in ownership of more than 50% within a three-year period, under Internal Revenue Code sections 382 and 383, the Company’s ability to use certain net operating loss and credit carryforwards to offset taxable income or tax will be limited. Such ownership changes were triggered by the initial acquisition of the Company’s stock in 2007 as well as cumulative ownership changes arising as a result of the completion of the Company’s initial public offering and other financing transactions. As a result of these ownership changes, the Company estimates that approximately $191.1 million of federal net operating losses are subject to annual limitations. At December 31, 2018, $108.0 million of these federal net operating losses were available. The Company estimates that an additional $10.3 million will come available each year from 2019 through 2022, $3.5 million in 2023, $1.4 million each from 2024-2025 and that the remaining $35.8 million will expire unused. In addition, California and certain states have previously suspended or limited the use of NOL carryforwards for certain taxable years, and certain states are considering similar future measures. As a result, the Company may incur higher state income tax expense in the future. In accordance with ASC Topic 740, the Company establishes a valuation allowance for deferred tax assets that, in its judgment, are not more-likely-than-not realizable. These judgments are based on projections of future income, including tax-planning strategies, by individual tax jurisdictions. In each reporting period, the Company assesses the likelihood that its deferred tax assets will be realized and determines if adjustments to its valuation allowance is appropriate. The Company had a net reduction in its valuation allowance of $1.6 million and $28.5 million in the years ended December 31, 2018 and 2017, respectively, and a net increase in its valuation allowance of $0.8 million for the year ended December 31, 2016. There is significant doubt regarding the Company’s ability to utilize its net deferred tax assets and, therefore, the Company has recorded a full valuation allowance reducing its net deferred tax assets to zero at both December 31, 2018 and 2017. In December 2017, new legislation was signed into law reducing the corporate U.S. tax rate from 35% to 21% for tax years beginning after December 31, 2017, fully repealing the corporate alternative minimum tax and making the NOL carryforward period indefinite for NOLs generated after 2017. In accordance with ASC Topic 740, deferred tax assets and liabilities are required to be measured at the enacted tax rate expected to apply when temporary differences are to be realized or settled. As of December 31, 2017, the Company re-measured its deferred tax balances based upon the new 21% tax rate. This resulted in a reduction of $55.7 million in the Company’s deferred tax assets, which was offset by a change in its year-end valuation allowance. In March 2017, the Company established a deferred tax liability with an offset to additional paid-in capital resulting from the conversion feature of the 2022 Notes. The initial difference between the book value of the convertible debt, issued with a beneficial conversion feature, and its tax basis was $70.9 million, a temporary difference. The net effect of the deferred tax liability recorded to additional paid-in capital was zero because the Company has a full valuation allowance against its net deferred tax assets. In 2018, the Company recorded a reserve of $0.4 million related to unrecognized tax benefits, or UTBs, which relates to tax positions taken in 2018. The Company’s UTB liability at December 31, 2018 was $2.9 million. The change in the Company’s UTBs in 2018 is summarized as follows (in thousands):
|  | Unrecognized Tax Benefit
Balance at December 31, 2017 |  | $ | 2,473 |
Additions for current year positions |  | 408 |
Balance at December 31, 2018 |  | $ | 2,881 |
The Company regularly assesses the likelihood of additional tax assessments by jurisdiction and, if necessary, adjusts its reserve for UTBs based on new information or developments. Due to the Company’s tax credit carryforwards, the reserve was recorded as a reduction of the Company’s deferred tax assets, and any potential deficiency would not result in a tax liability. Therefore, no interest or penalties were recognized in income tax expense for the years ended December 31, 2018 and 2017. Due to the Company’s full valuation allowance against deferred tax assets, none of the UTBs, if recognized, would affect the effective income tax rate. The Company estimates that it is not reasonably possible that within the next twelve months, any of the unrecognized tax benefits will significantly increase or decrease. The Company is currently subject to audit by the U.S. Internal Revenue Service, or IRS, for the years 2015 through 2018, and state tax jurisdictions for the years 2014 through 2018. However, the IRS or states may still examine and adjust an NOL arising from a closed year to the extent it is utilized in a year that remains subject to audit. The Company’s previously filed income tax returns are not presently under audit by the IRS or state tax authorities.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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